Luxe, a startup that valet parks your car when you can’t find a spot, just raised $50 million from Hertz

It's already a pain to find parking in crowded cities. It's even
worse if it's a city you've never been to.

That's why rental-car company Hertz just made a $50 million
strategic investment in Luxe, a San Francisco-based startup that
makes it its job to handle the parking for you.

Luxe works as a valet on-demand. In a way similar to Uber, you
tap on an app when you need your car parked, and it tracks you as
you arrive at your destination, whether it's at a restaurant for
dinner or at your office for the day.

The startup does more than just park the car — it can also refill
the gas or have it washed while you're in meetings. Then you can
either schedule your return or tap the button to have your car
returned to you by a Luxe valet.

Now its new strategic investment from Hertz will hopefully help
both resident city-dwellers and out-of-town visitors
take the hassle out of finding a parking spot.

"Renting a car isn't the easiest thing in the world, and
especially when you rent a car and go into a city or metro area,
not being able to find parking and having to find gas especially
when you don't know the city well is a challenging experience,"
Luxe CEO Curtis Lee told Business Insider. "And those are the
perfect use cases that customers use Luxe for right now."

Business Insider learned that the Series B round lead by Hertz
officially closed on Tuesday, although the partnership had been
rumored since a
report by The Information in February. The final
valuation ended up higher than the rumored $110 million,
according to a person involved in the deal, making it a major
milestone for a company in a beleaguered category of on-demand
startups.

Several other companies have already failed and shuttered or
pivoted their business away from serving drivers at the push
of the button. Luxe is the only company that hasn't had the
same fate, Lee said.

Instead, it's grown 30% month-over-month in a market where all of
the competition has fallen by the wayside and now has
a $50 million cash infusion from one of the top rental-car
companies to power it to grow even larger.

"By the time our competitors have folded, we’ve been meaningfully
bigger," Lee said. "We’ve been telling press for so long that
we’re the leaders in the space. Now it’s extremely clear."

The allure of corporate cash

Transportation startups are starting to see an increased interest
and an increased opportunity to partner with incumbents in the
field.

Since the beginning of 2016, General Motors has been on an
investing and buying spree, striking a massive $500
million investment in Lyft and buying a self-driving-car
startup Cruise for $1 billion. It also mopped up the remaining
assets of Sidecar, one of the first ride-hailing car companies,
in an attempt to brace for the future when no one owns
cars.

BMW also
made a similar strategic investment last fall in Zirx, Luxe's
once rival in the on-demand-parking business that has
already pivoted to focusing only on enterprise customers.

Luxe's $50 million from Hertz, though, is a much larger check
than its rival received, and Lee attributes that to turning
on-demand parking into a good business.

No one wants to invest in a business that's not going to be a
sustainable business

"We're profitable in certain cities and we're close to being
profitable in the others too," Lee said. "Honestly I think the
reason why a lot of our competitors folded and the reason why the
on-demand space is under so much heat is that companies haven't
been able to demonstrate that they can turn profitable, and I
don't think we would have gotten the attention, the term sheets,
and certainly the investment from Hertz had we not been
profitable. No one wants to invest in a business that's not going
to be a sustainable business."

The latest deal with Hertz kicked off after the top car-rental
company approached the San Francisco startup, Lee told Business
Insider. There were several other term sheets on the table for
the company, a source told Business Insider, but Luxe went
with the largest amount and the only strategic partner rather
than a traditional venture-capital firm.

The deal doesn't yet come with any formal partnership
announcements, like reduced costs for Hertz customers, but Lee
acknowledged that he was looking forward to working with the
company down the line.

As part of the financing, Hertz CEO John Tague, who also used to
run United Airlines, is joining the board.

“Our investment will support Luxe's ability to scale its
successful service to other major urban centers, while offering
our customers enhanced convenience and value with regard to their
urban parking needs,” Tague wrote in a statement. “Building on an
expanded Luxe footprint and capability, we will partner together
to develop new innovative and integrated services that will
enhance the relevancy of our core products in urban
markets.”

'A Darwinian process'

Luxe's latest deal also signals the return in faith from some
investors in the on-demand space. After Zirx's pivot, a slew
of other on-demand companies, like SpoonRocket for food delivery,
shuttered their doors. Cargomatic, an "Uber for trucking" startup
in LA, just laid off 50% of its staff in the last month.

"Luxe has always been about making car ownership
or people who use cars or anyone who has a car as painless and
delightful as possible. That promise alone means they had a ton
of business," said Ryan Sarver, a partner at Redpoint
Ventures.

He compared what's happening in the on-demand
space now to Amazon's rise among ballooning ecommerce
startups.There were a ton of companies,
but only a few winners — yet few argue that having an ecommerce
company like Amazon is a bad business overall. What's happening
now is the weeding out of the good from the bad, he
believes.

"I think what
you’re starting to see is there’s been a kind of a Darwinian
process happening," Sarver said. "[On-demand] got overhyped,
and now it’s getting overhyped in the other direction."

Despite the calls for
the death of the on-demand economy coupled with a
downturn in startup funding, Lee said it wasn't a hard
sell to convince Hertz about Luxe's strength in the
market. It had already emerged from the competition as the only
leader standing, and it had the growth and path to profitability
he says to support it.

"If you kind of drown out some of the background noise, the core
business speaks for itself," he said. "The climate is tough on
the fundraising side, and I'm just proud of what we've
accomplished. Getting this round, and a massive up-round at that,
is kind of a testament to the company's strength."